Since our economic crisis began the number of people around the nation defaulting on their loans is sky high and showing no signs of relief. This is especially true for borrowers who have obtained Federal Housing Administration (FHA) loans.

In 2009, the number of borrowers who defaulted on their federal backed mortgages has increased by more than a third from the previous year. This shows that there could potentially be a mass wave of foreclosures over the next year or so.

The percentage of FHA borrowers that have missed three payments or more on their mortgage rose to about 9.1% in December, this is up from 6.5% one year prior, according to the agencies data.

Even though the housing market seems to be showing a slight improvement, the FHA loan default rate continues to climb and this is deteriorating the agencies cash reserves. A part of the problem seems to lye within loans that were originated in 2007-08, because it seems most people that fail to pay their loans do so within the first few years of occupancy in the home. 

Many people are not aware that the agency actually covers their losses by fees they charge the borrower for defaulting on the loan. But if the default rate for FHA loans continues the rise their cash reserves may eventually run out, if this happens you can bet the government will be the first to bail them out with taxpayer funds.

Moe Bedard
My name is Maurice "Moe" Bedard. I am the founder of America's #1 Mortgage Forum, LoanSafe.org. My online work has been featured in the New York Times, LA Times, Fox Business, and many other media publications.